Loan Charge: MPs attack HMRC's "cynical campaign of misinformation"
MPs have called for a six-month delay on retrospective tax for self-employed people who used 'loan charge' schemes.
HMRC and the Treasury have "systematically abused rules" and waged a "cynical campaign of misinformation" say MPs.
A report by the All Party Parliamentary Group on the Loan Charge, published yesterday, has harshly criticised the taxman and Government.
People who used so-called 'Loan Charge' schemes had their salary paid in loans, which didn’t need to be repaid, allowing them to avoid Income Tax.
The 91-page report claims that HMRC knew that retrospective taxes could have serious implications for individuals' mental health, yet failed to set up a counselling helpline.
MPs also claimed that "the Loan Charge Inquiry has concluded that HMRC officials may well have breached the Civil Service Code and that Financial Secretary to the Treasury, Mel Stride, may have broken the Ministerial Code."
Loan Charge schemes were banned in 2016, with charges were intended to be levied by HRMC from April this year.
Financial Secretary Mel Stride had claimed that the plans were "making our tax system fairer" and previously told MPs that HMRC will deal with individual cases "appropriately and sensitively".
A review of the Loan Charge by the Treasury in March noted its impacts but argued: “it is right to end this form of tax avoidance for good”.
Calls for six-month delay
The report by MPs also draws on a survey of 1,768 people affected by the Loan Charge, explained Liberal Democrat Ed Davey.
“Prior to the Loan Charge Inquiry there was little evidence about the reality of the Loan Charge.
"Now the evidence exists there is clear risk of harm to people. The Government must do the only responsible thing and delay the Loan Charge and announce an independent review into it.”
MPs want a six-month delay, an independent review by a tax judge and a 24-hour counselling helpline for those affected.
They want individuals to be given 10 years to pay debts to HMRC, regardless of their income.
Although MPs' recommendations are not binding, it's not the first time HMRC's handling of the Loan Charge has been criticised.
In a wide-ranging ealier report by the House of Lords Economic Affairs Committee, Lord Forsyth described the crackdown as “devastating the lives of middle and lower income individuals, from the private and public sector (including the National Health Service) who used disguised remuneration schemes, in many cases being required to do so by their employers.”
Government figures show that around 50,000 people used loan schemes, 65% of whom worked in ‘business services’ and just 3% in medical and education services.
20 ways to pay less tax: cut your Income Tax, Council Tax, and Inheritance Tax
Council Tax also criticised
Whilst tax avoidance has been long associated with wealthy individuals and celebrities, the Lords Committee has warned that HMRC has penalised "uninformed or naive decisions by unrepresented taxpayers”.
At a local level, councils have also been warned that their aggressive tactics are harming the most vulnerable and are even worse than those used by private companies.
The Money Advice Service wants councils to take a more ‘progressive’ approach, acknowledging that a third of those seeking advice for debt are behind in their Council Tax.
Citizens Advice wants the Government to establish an independent regulator for bailiffs.
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1. Apart from someone who has been living in a cave for the last several thousand years, who thinks you can earn money in the UK without paying income tax? 2. Mental Anguish! Tell me about it, after making PAYE contributions for >50yrs + NIC. HMRC is quite in order to claim back taxes from all types of fiddlers.
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I used the loan charge scheme of contractor employment when I lost my job in oil and gas. I received appropriate legal and tax advice and the advice was that it was not illegal and was fine and so I acted in good faith . I have never and would never do anything illegal and have worked all of my life since 16. To be told they are applying retrospective tax going back 10 years is devastating. By all means draw a line in the sand if you want to close loopholes and everyone knows you can’t use them any more but don’t penalise people For doing something that wasn’t illegal , instead go after self employed people who take cash in hand , large corporates who do everything to avoid tax. Not hard working mums and dads not doing anything wrong except working hard and bringing in money. I was paying corporation tax and I’m only one person. Some people have commit suicide because of this and it left me very upset , angry and anxious.
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IF someone is paid in this 'loan' way of tax avoidance & has no choice about it, although I can't see any reason for this to be done this way, then surely they must realise that at some point tax will have to be paid. They should, therefore, be putting money aside to cover this. If they don't then they get all they deserve & must be complicit in any tax avoidance. Individual tax avoidance is one thing, morally & perhaps now legally wrong & they should be persued. Big business tax avoidance is another thing but much harder for HMRC to go after. As usual, they seem to take the easier option & individuals appear to be taking the point on any crackdown. There is one thing about tax avoidance common to both situations & that is they are simply using current tax law to their advantage. These advantages are not accessable to the majority of tax payers. Surely then, any faults in the system that they take advantage of in order to avoid paying tax MUST be due to the current tax laws being faulty, badly written or so complex & convoluted that few can fully understand them & those few are NOT working at HMRC! Laws are put together by lawyers & they often write in some aspects that can be challenged in order to guarantee their own income. Such is the legal system that we now have. Maybe THAT is what needs to change?
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05 April 2019